More Trouble for Pixelon: 2 Investors Sue

Two investors have sued former officials and backers of Pixelon Corp., saying they withheld critical information about the troubled San Juan Capistrano start-up to raise money through a private placement.

Pixelon, an online broadcast network, made headlines in April when its founder was exposed as a convicted embezzler living under an assumed identity. The company filed for Chapter 11 bankruptcy protection Thursday, just over a week after ousting its top managers. It also faces a clutch of lawsuits filed by disgruntled former employees.

The latest suit was filed June 30 in U.S. District Court in Louisville, Ky., by two Kentucky men who bought 150,000 shares in Pixelon’s private offering. They allege that Pixelon and Advanced Equities, the Chicago investment firm that handled the offering, omitted or misstated information important to their decision to invest.

The lawsuit asks for $800,000 in damages. It also seeks class-action status.

Executives at Pixelon and Advanced Equities declined to comment on the case Friday.

Pixelon first drew attention in the tech world last fall by spending at least $10 million of the $23 million raised in the private placement to toss an extravagant Las Vegas launch party.

In April, founder Michael Fenne was identified as David Kim Stanley, a fugitive on Virginia’s most-wanted list for three years. Stanley, who was convicted in 1989 of stealing hundreds of thousands of dollars in an investment scam, remains in a Wise, Va., jail.